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The Workers' Party Members of Parliament (MP) from Sengkang GRC will be objecting to this year's Budget, as they disagree with the government's proposal to raise the raise the Goods and Services Tax (GST).

MPs He Ting Ru, Jamus Lim and Louis Chua all shared their thoughts in the Budget 2022 debate in Parliament today (Feb. 28).

He Ting Ru: No one should be left behind

No one, even the most vulnerable in Singapore, should be left behind as Singapore charts its new way forward this year, He Ting Ru said in Parliament, possibly referencing the name of Finance Minister Lawrence Wong's Budget.

This is the government's duty, she said, following pleas she had heard for leaders and policymakers to "come down from the ivory towers to see what the situation is on the ground".

She added that "the situation where our people feel and perceive that this chamber is an ivory tower that is out of touch with reality is highly concerning, and one which cannot be allowed to carry on".

Rising costs

He Ting Ru highlighted the cascading effect of price increases will be detrimental to vulnerable households already on the "knife's edge".

Additionally, Russia's invasion of Ukraine will lead to supple chain disruptions which will affect Singapore — both are major exporters of agricultural products, and Russia is one of the largest global exporters of fertiliser.

It is also a major supplier of natural gas, and 95 per cent of Singapore's energy needs are met by natural gas.

"All this further underscores the need for our green transformation to take place urgently. The situation is grim in the near term," she said.

GST exemptions on essential items

Taking these factors into account, the WP cannot agree with a GST hike, whether delayed or staggered, He Ting Ru said, as they believe that not all the other alternatives have been exhausted.

To ease the burden on lower income groups, she suggested considering allowing exemptions on GST for essential items such as food supplies, healthcare and care services, including childcare.

This is something that countries like the UK, Australia and Japan have already adopted.

Exempting items such as health care, infant care and childcare will also help ease current and future cost pressures, and industries that struggle to fill the manpower requirements of local workers.

Exemptions on the latter two will also contribute towards raising Singapore's low fertility rate, she claimed, as cost is one of the main concerns people who choose to not have, or delay having children, cite.

While high income earners will also benefit from these exemptions, He Ting Ru argued that the benefits from these essential items will be self limiting — "After all, how much more rice can a rich person eat?"

Meanwhile, for those that argue that this will increase compliance costs for businesses, she countered that with the advancement of technology, these costs should be much lower compared to when GST was first introduced.

She said that this should not be "too much effort" for an efficient country like Singapore.

Jamus Lim: Alternatives to GST hike should be considered

Meanwhile, Jamus Lim said that Singapore "runs the risk of shooting [itself] in the foot, of scoring an own goal" if it were to raise GST amidst a "nascent recovery" from the Covid-19 pandemic.

Lim then suggested a number of "credible alternatives" the WP had come up with that if deployed, would "stave off the [...] need to increase GST".

He said that deploying any of these "levers" would generate close to S$3.66 billion in revenue, comparable to the projected revenue generated from the proposed GST hike.

Corporate tax lever

The first of Lim's suggestions is for Singapore to adopt the global minimum corporate tax rate of 15 per cent for multinational corporations.

While Singapore could lose some revenue to the departure of some firms, if implemented, it could lead to a two-thirds increase in the effective rate from current levels.

While allowing small and medium enterprises to retain their 3 per cent effective rate, this increase in the corporate tax rate could generate about S$3.45 billion in revenue, Lim estimated.

Wealth tax lever

Lim's next suggestion, the wealth tax lever, "puts asset taxation at the front and centre of revenue generation".

He said: "We adopt the government's current threshold of 10 years required for land leases to be classified as permanent, above which land sales receipts must be fully channelled into reserves, and extract just the first nine years for recurrent expenditure while redirecting the remainder into reserves."

Currently, proceeds from land sales are not part of government revenue and cannot be directly used for expenditure. Instead they are invested, and part of those investment returns can support expenditure.

This lever also incorporates the government's proposed property tax changes, which is expected to generate an additional S$380 million, said Lim.

"Finally we follow the net wealth tax tiers that [have] been previously proposed to this house to derive revenue from this channel under very modest recovery assumptions," said Lim.

He estimated that this lever could generate about S$3.7 billion.

Reserves contribution lever

The third alternative that Lim proposed was an oft-cited Workers' Party proposal to reduce the share of reserve interest income that goes back to the reserves from 50 per cent to "a lower but still absolutely respectable" 40 per cent.

According to Lim, this would not constitute a draw on reserves, "but merely represents a reduction in the rate of accumulation of reserves".

Lim estimates that this could generate S$4.31 billion.

Externalities lever

Lim's final proposal entails increasing "sin taxes" such as those levied on gambling, alcohol and tobacco, as well as "carbon generating activities".

He suggested that the government apply an increase to S$80/tCO2e, but only channel half the revenues towards "mitigating the transition and encouraging adoption of green technologies".

Each of these channel's taxes would be increased by a factor comparable to the GST hike.

By Lim's estimations, these additional increases will allow Singapore to increase the effective corporate tax rate to "just 8 per cent" and would generate S$3.65 billion.

"Tantalising possibility" of not raising GST

Lim admits that the government, with its "army of ministry, analysts and superior access to data and information", would likely be able to fault his proposals.

Nonetheless, Lim said that his proposals puts forth the "tantalising possibility" that Singapore can choose not to raise GST, and instead raise these other levers instead.

"The most important thing for us is to cease stating 'I wish' but to start stating 'I will', we must instead consider nothing impossible and treat possibilities as probabilities," he said.

Louis Chua: Tax changes targeting the rich amount to "tokenism"

Workers' Party MP Louis Chua said of the Budget that he welcomed the adjustments to residential property taxes and additional registration fees for cars as a "step in the right direction".

However, he said that the Budget's measures on wealth taxes amount to "tokenism, rather than a meaningful attempt at wealth taxes in Singapore".

Chua explained that the estimated revenue expected to be generated from these measures, together with the proposed higher personal income tax rates, would only be S$600 million.

He said that this amount is "significantly below" the conservative estimate of S$1.2 billion that some academics have put forth if Singapore were to adopt a net wealth tax.

Chua suggested that Singapore could afford to levy a net wealth tax, as a country "with no capital gains tax, no tax on dividends, no inheritance tax, no estate duties and still has one of the lowest effective personal income tax rates globally".

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